Tesla’s been in the news again recently, but not for being a revolutionary, up and coming automotive company.
Instead, the news is grim. Another Tesla owner has died in an accident related to the Autopilot feature, whether or not the car was actually responsible remains to be seen. But when this accident is added to the Model S recall due to faulty power-steering bolts and continued delays in producing the more affordable Model 3, it paints an unpleasant picture.
Investors, understandably, are wary that Tesla may not have much of a future left.
Spending, Downgrades and Bonds. Oh My!
Moody’s Investors Service has downgraded Tesla’s credit rating due to concerns that it was spending money far too fast. In fact, some analysts are concerned that the company may be out of money by the end of the year. A lot of this is due to the inability of the company to produce the Model 3s at a sustainable pace.
When the car was announced, nearly 400,000 people put down $1,000 each to save their spot in the production line, but by the end of fourth quarter 2017, the company had made only 2,425 cars. Elon Musk has plans that show an intention to lift that number to 2,500 Model 3s rolling out of the factory each week, but the actual numbers aren’t yet available.
Moody’s (and others) are concerned that Tesla’s $200 million in convertible bonds due later this year and $900 million that are due in 2019 will bankrupt the company. Moody’s predicts Tesla needs about $2 billion to keep the doors open and pay its debts. Without a reliable supply of vehicles to sell, Tesla could be in trouble.
A History of Too Much Promotion
Tesla has repeatedly failed to meet its production deadlines, while at the same time hyping the very product it can’t produce in adequate numbers.
Elon Musk is a natural showman, but he may be less reliable as a businessman. In 2017, he predicted the arrival of the much-needed Model 3, and that it would push car sales to 500,000 yearly by 2018. He lowered that prediction to 100,000 Model 3s later in 2017. Then in August 2017, he said the company hoped to make 20,000 cars a month by December. None of these things came to pass.
Although Tesla has unquestionably led in electric car innovations in the automotive industry, if the Model 3 doesn’t get into regular production soon, there won’t be a dime left in the bank to pay for further development.